Correlation Between VULCAN MATERIALS and Rayonier Advanced

Can any of the company-specific risk be diversified away by investing in both VULCAN MATERIALS and Rayonier Advanced at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining VULCAN MATERIALS and Rayonier Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VULCAN MATERIALS and Rayonier Advanced Materials, you can compare the effects of market volatilities on VULCAN MATERIALS and Rayonier Advanced and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in VULCAN MATERIALS with a short position of Rayonier Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of VULCAN MATERIALS and Rayonier Advanced.

Diversification Opportunities for VULCAN MATERIALS and Rayonier Advanced

0.6

Correlation Coefficient

VULCAN MATERIALS  Rayonier Advanced

Poor diversification

The 3 months correlation between VULCAN and Rayonier is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced and VULCAN MATERIALS is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on VULCAN MATERIALS are associated (or correlated) with Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Rayonier Advanced go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Rayonier Advanced

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 0.68 times more return on investment than Rayonier Advanced. However, VULCAN MATERIALS is 1.47 times less risky than Rayonier Advanced. It trades about -0.09 of its potential returns per unit of risk. Rayonier Advanced Materials is currently generating about -0.37 per unit of risk. If you would invest  26,200  in VULCAN MATERIALS on September 21, 2024 and sell it today you would lose (800.00) from holding VULCAN MATERIALS or give up 3.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

VULCAN MATERIALS  vs.  Rayonier Advanced Materials

VULCAN MATERIALS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, VULCAN MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rayonier Advanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VULCAN MATERIALS and Rayonier Advanced

The main advantage of trading using opposite VULCAN MATERIALS and Rayonier Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VULCAN MATERIALS position performs unexpectedly, Rayonier Advanced can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Rayonier Advanced will offset losses from the drop in Rayonier Advanced's long position.

The idea behind VULCAN MATERIALS and Rayonier Advanced Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.